Why Edtech Companies Fold

Geddit. Taught It. MommaZoo. In the last six months, all three of these companies have announced that they’re shutting their doors. Two are Imagine K12 graduates--a sobering reminder that not all IK12 companies go on to join the ranks of ClassDojo and Remind.

What happened? Yes, it’s hard for edtech companies to raise money. But these edtech company founders have concerns that run deeper--to growth, to market potential, and to the harsh realities of whether “free” or “freemium” products can transform into sustainable business plans.

Why the Shutdowns: Growth and Traction

For Taught It co-founder Jason Orbaugh, the decision to shut down predominantly came as he struggled to differentiate his product--an online professional network for teachers--from competitors, as well as how to make the product profitable. Orbaugh announced Taught It’s “termination of service” in a March 8 email to users.

According to Orbaugh, he and his team “never found the business model.” Orbaugh’s initial idea was to charge teachers a small fee to establish a “persistent connection” with an individual. In particular, Taught It offered to connect teachers with whomever they wanted, from a colleague to a key influencer in the industry. But within months, Orbaugh and his team shifted to a free model to see if they could drive quicker adoption.

“We always had in mind what teachers and students would love to use--but we failed to get fast traction and fast growth that we needed.”

Geddit CEO Anton Troynikov

“We never really gained the traction that was necessary to keep putting energy into the system. We tried a couple of business models... but at the end of the day, Taught It wasn't able to really differentiate itself from other services on the market,” he says.

Growth turned out to be a similar issue for IK12 graduate, Geddit, a classroom feedback tool designed to help teachers determine how well students understand material during lessons. Geddit told its users in March that it would continue operations only through the end of the school year.

“We always had in mind what teachers and students would love to use--but we failed to get fast traction and fast growth that we needed,” says co-founder and CEO Anton Troynikov.

Troynikov said that Geddit purposefully aimed to create a business model around growing its tool among individual teachers and students. "We wanted to establish a critical mass of teacher and student users, so that we could monetize at other scales--schools, classrooms and districts," he says. And much like Taught It, the Geddit team opted to try to drive initial growth by offering its product for free. But that approach demands incredibly fast growth, he points out.

“At its start, you go for user growth and try to build something that people really really love, and then go up to monetize from that,” Troynikov explains. But if you cannot get that same viral user growth that companies like ClassDojo are able to achieve, you “don’t make it.”

What They Would’ve Done Differently

Geddit’s Troynikov says he wishes that the company had first targeted a more tightly defined group of users rather than all teachers. “Most likely, what we would do differently is target a smaller subset of teachers in order to get better engagement in that subset,” he says, before trying to scale.

Orbaugh, on the other hand, says that if he could go back in time, he would charge users from the very beginning. Users most clearly show how much they value a product when they have to pay for it, he notes.

“I'll credit Dan Martell with some of this… whatever your long-term vision is, charge from day one," Orbaugh says. Sharing some “samples” of product or giving a few free accounts to a small number of users is fine, he adds. But “‘Free’ is not a marketing plan,” he declares.

Even a trickle of revenue isn’t necessarily enough. “Do the math early and often,” Orbaugh advises, because “revenue doesn’t always mean that you're building a profitable business.”

Advice for Other Early-Stage Entrepreneurs

Not all entrepreneurs stay in edtech once they’ve given it a go. Catheryne Nicholson, who had a long professional history in technology and energy, poured more than three years into MommaZoo, a platform for supporting parent engagement in school activities and classes. In January 2014 she returned to a pure-play technology company by starting a crypto-currency application platform BlockCypher, which raised $3.1 million only a month or two after it started.

In spite of their experiences, Orbaugh and the Geddit team remain upbeat about staying in education. Geddit co-founder Justin Mann currently works for the SF-based AltSchool. Orbaugh recently took a job with California-based edtech company, Problem-Attic.

“Education is a tough market, but all markets are tough,” Orbaugh says. “The K-12 environment is very reluctant to change, and as a result, in my opinion, so many young people today are trying to over-invent it.”

Create innovative products, Orbaugh recommends, but stick with established business models. And stay focused, Troynikov urges. “Don't say, ‘I'm going to build this for every teacher and every student and they're going to love it.’ Focus really heavily on one specific kind of user first.”

“The edtech market is far from mature,” Troynikov adds. “We ain't seen nothing yet. There's going to be innovation in entirely different directions.”

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